NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Debt Products
For a resident individual, tax deducted at source (TDS) on interest from a bank fixed deposit is best described as which of the following?
TDS on fixed deposit interest is an advance collection of tax that is credited against the individual's final tax liability when the return is filed. It is not a final tax, so a refund or extra payment may arise depending on the slab rate.
- AA final tax that discharges all liability regardless of slab
- BAn advance collection of tax that is adjusted against the final tax liabilityCorrect
- CAn additional tax payable over the slab rate
- DA tax levied only on non-resident depositors
Explanation
TDS on deposit interest is a mechanism for collecting tax in advance. It is credited against the total tax liability when the return is filed. If the slab rate is lower, a refund can be claimed; if higher, extra tax is paid.
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